Guess why you did not get THAT shortlist ??

LUCK...............

With a pile of 300 résumés on his desk and a need to pick someone quickly, my boss told me to make calls on the bottom 50 and toss the rest.

"Throw away 250 résumés?" I asked, shocked.
"What if the best candidates are in there?"


"You have a point," he said. "But then again, I don't need people with bad luck here."

- Becky Horowitz (Reader's digest)

Tata-Corus - Analysis

Here's my analysis

Winners
UBS + Goldman Sachs: Had bought 11 percent of Corus before they pushed CSN into the bidding game.(think 0.11*11 billion *(609-455)/455 dollars ) **

CSN: had 36 million of Corus Shares. Put in a bid of 475 pence per share (and did due diligence later, can you belive it, did it get ponied by the bankers or it believed Tata would outbid it anyway)

Corus and its other shareholders: Obvious Reasons

Indian Politicians: Blowing their own trumpet

What does India (or Indian industry) gain through this publicity? Would investors be more willing to invest in India after this?

Potential Dark Horse

Tata Steel:

Got screwed ??

Yes, but it had already decided to build up capacity. Think industry dynamics (consolidation, pricing power) Paid $700 per tonne of production capacity. Would have needed double that amount to build (unless what I read was wrong, some say PV of expanding to that capacity to be $2000)

Verdict

There can be only one loser . (unless the industry consolidation wipes out smaller players) But fingers crossed?

** 400+ million dollars

Tata Corus CSN - Three way Deal?

Instead of fighting over Corus if CSN and Tata Steel combine to form a three way alliance, it may be the best for the shareholders for all three companies (at least for CSN's and Tata's). The ongoing bidding war would only mean that either of the two companies would end up overpaying for the deal and the other would miss out on the synergies.

It may be best to try a new form that companies Corus's access to markets, CSN's access to raw materials and Tata's managerial capability. But would all the managers be ready to give up personal gains for this option? This remains to be seen as the story onfolds.

This week at ISB...

The week has been interesting to say the least. Not only did we get to interact with to top honchos of the corporate world but also had a chance to be in close quarters with our very own 'MAN'. I mean our very own PM Manmohan Singh.

It started with the Capital Markets Conference on the 29th followed by the ISB Leadership Summit on the 2nd of Dec and then the two day GLS. Each of these events were special in their own rights and have been clubbed with the five year celebrations of the ISB.

We are not sure where we may be another 10 years from now but know where we want to be and the promise is worth the wait. But hope is to be a part of that promise than just a spectator.

It is very easy to get disillusioned by what happens at ISB. So you need to keep you feet firmly planted in the reality and work towards what you want the most. The idea is to prioritize they say.

P.C. on microfinance

Chidambaram states yesterday what he should have a long time ago. Recognising that 22-25% percent interest charged by MFIs could reflect actual costs of transactions and put to rest attempt of some states to cap interest rates. What must be kept in mind that even at these rates MFIs cannot reach the poorest of poor. One of the most efficent (SKS) MFIs charges 26% and it may not be possible for others to reduce their costs to this extent.

The need of the hour is innovation in the business of micro credit. But there is hope, only recently has micro-fin become a hot debate topic around the world and attracting talent in some of the top B Schools. ISB has a full time elective on microfinace.

Problems of micro-fin are many fold in India (as in any other state). Lack of information leads to adverse selection and difficulty in monitoring leads to moral hazard. Both of these added to the problem of limited liability of borrowers and high transaction costs. The need of the hour is to create innovative products that make the process efficient reducing the risks ie costs associated with the small loans

Placements Ahoy!

This is that time of the year. It has come in earlier than was expected as some of the companies have been accommodated to coincide with their international recruiting schedules. However to keep the process fair to the later recruiters, while interviews would be conducted now, the offers would be announced only at the end of Day 1 of the placement week in February. For some, their focus companies are coming now and this is the chance for them to grab early positions. For the rest it is at least good early preparation for the placement week.

I plan to apply to a few as I find the roles interesting although that has nothing to do with my prior experience. The challenge would be to display skills that I can transfer to the open positions.

CAS has promised a lot of fireworks in the coming few months and indicated that this year's the recruitments are going to be our best yet

Me!! I am keeping my fingers crossed.

The topology of apology

Some say that one of the most difficult task for a person is to issue an apology. Ideally it should be one of the easiest things to do if one realizes one's mistakes and has a clear conscience.

However in corporate settings, it has other complexities. Some of the complexities arise bacause managers sometimes have to apologise for sins committed by their predecessors or by oversight of others. Other complications exist because doing so may not be in the best interests of the company, at least in the short run and since most managers' incentives are tied to short run performance it becomes an even ardous task.

Then again, there is a problem of how your apology is perceived. It is equally important that the company is perceived correclty and the wording and timing of the apology are appropriate. Lastly, the companies also must match the words they say through their actions.

Reference: Economist.com

V

Well the title is not 'V'ictory. It stands for term fi'V'e during this one year long journey called ISB. Added to that, it also stands for the number of courses I am taking this term different from term IV ( We had IV each in first IV core terms).

However, if I add the PaEV course, technically it should count for VI. I might end up applying to V or at the most V+I companies in the first round between Terms V and VI. Would be glad to make it in I of them. I mean I would be glad to make it in at least one.

Having slept at VI in the morning, am not sure if I am making any sense. But thought it was kind of interesting.

Terrorism and Index of Political Freedom

Globally, people tend to view poverty and deprivation as a cause of terrorism. However, in a research, conducted by Alberto Abadie at the John F Kennedy School of Government (Harvard University), factors such as GDP per capita, Human Development Index (HDI) and the Gini Index were found to be non-significant predictors of level of terrorism in countries around the globe.

In the study, Abadie used regression for measuring terrorism as measured by World Market Research Center's Global Terrorism Index (WMRC-GTI) upon various indicators of poverty including GDP per capita, HDI (measure of development in terms of health, education and income) , the Gini Index (measure of income or consumption inequality), Freedom House's Political Rights Index (Freedom House, 2004) , certain geopolitical features including include measures of country land area, average elevation, fraction of the country area in tropical climate and landlock and Indices for linguistic, ethnic, and religious fractionalization which measures the probability that two individuals chosen at random from the same country belong to different linguistic, ethnic, or religious groups.

The data suggests that the dependence on GDP per capita, HDI or the Gini index is not statistically significant and fails to explain terrorism differences. However the other variables including differences in linguistics, geography and climate and lack of political rights are significantly related to the incidence of terrorism.

The study, however, suggests that political freedom has a non-monotonic effect on terrorism i.e. terrorism does not rise with more oppression of freedom but is maximum in the intermediate range (E.g., Iraq, which is making a transition from an authoritarian regime to one with more political freedom is witnessing increased amounts of terrorism and North Korea, which has one of the most oppressive regimes in the world, has the lowest levels of terrorism as indicated by the WMRC Global Terrorism Index (2003-2004)

Also, certain geographical areas have been attributed to cause failure to eliminate terrorism such as mountain terrains (Afghanistan) or tropical jungles (Columbia).

Figure 1 Terrorism and Political Freedom (1- Politically Free to 7 - Authoritarian)

Reference:
Poverty, Political Freedom, and the Roots of Terrorism, Alberto Abadie, October 2004

Hierarchical Human Development Index (HHDI): Search for a better index

There is a multitude of indicators that quantify human progress on economic and social development. But what makes a person developed? Yes for the vast majority of people, getting the basic necessities of life, food, shelter and clothing is an everyday struggle. Once a persons basic needs are taken care of, is he content in mere sustenance. Can we call him developed?

If we say that a true measure of development is happiness, what is the index that measures true development of people? Until we develop happiness meters to measure happiness, we have to keep looking for better indicators that measure development.

One way of thinking about and happiness and development is in terms of evolution of needs. As a person evolves, his focus shifts to a new level of needs. If we consider Maslow’s hierarchy of needs to be absolute (although there is no proof of that) how would we want to measure our progress? For some one in search of Actualization, how good is to force him or her to think about basic material needs. Every excess is limited by the law of diminishing returns. Having one common measure of development index is like forcing everyone to keep thinking about needs that he or she derives only a marginal benefit from.

Maslow's hierarchy of needs.

5. Actualization

4. Status (esteem)

3. Love/belonging

2. Safety

1. Physiological (biological needs)

Countries, just like individuals, differ in their focus based on the level of collective development. After having achieved a level, they may want to focus on another set of needs to satisfy. Although, HDI indicator in its present from is a powerful tool for countries to measure their development on the bottom level and there is no doubt that there is a pressing need for them to do so, it has limited significance to top one third of the countries. Why not have different levels of HDI for countries on different levels. This index, called HDDI, would retain the advantages of the current HDI, and would give the relatively advanced societies a handle on their development based on their current level. Countries would be rated on the level they are and compared to countries at the same level. Measures such as environmental protection, political freedom, and gender and secularity issues can be built into appropriate levels. Also, the level of a country can be used to decide upon its responsibilities on each of these levels and those below it. The goal of the nations would be to move up in the hierarchy and then move forward in its level until they reach a new level.

Such an index should take care of the concerns of most nations and possibly give them relevant measures to focus on.

World Without Engineers (Part I)

Here's a quick reminder of what the world would be without engineers. More in part deux!

Paper Presentation

Finally managed to send out my first ever paper. This was finance paper for a B School competition. Even if I do not win or do not get shorlisted, it gave my a lot of satisfaction. More than anything, it meant that I had to read and understand a lot of greek stuff that I initially thought was I was weak in. Anyways this is a good beginning.

Hope to do at least a few more before the course ends ,provided I can afford some time. This effort meant that I slept less than four hours every night over the past 3-4 days. Hope to catch some sleep now on the weekend.

Or maybe not...

Skill and Resume Verification by NASSCOM?

Came across this post about NASSCOM creating a repository of information about skills of IT and BPO employees. While it solves some problems for companies and some for employees (Think lemons market...), it can potentially create a lot of trouble if not used properly. It says that the employees would decide about who can view their personal information, but do you think that a poor BPO employee can stop anyone from viewing his or her information.

Other problem would be deciding who updates the information with NASSCOM and the frequency of these updates. Lets say an ordinary IT worker, has learnt a new skill and now wants to update the skills registry, maybe to switch jobs. How would this information be authenticated. The current employer would be reluctant to update even the current skills of his/her employer on the repository. Well they can't even do it successfully on intra company databases except for a few companies. Consider this,1) why would a company, which is fighting attrition, want to update its employees skills on a common database so that others could simply poach these employees. This could also lead to a few companies blackmailing its employees. 2) If on the other hand, the employees themselves update their own skills, there would be no difference at all from the current situation or make the current situation worse. I see huge 'Agency Costs' in both these situations.

The answer is educating people about the pitfalls of resume fudging, and relying on honor system. Performace, in the first 3 months should give ample proof of the fudging if that happens.

A possible solutions could be, a registry for those who are found to have fudged data. The onus of proving the fudging should lie with the company.

Efficient Markets or A Random Walk

What affects stock prices or everyday basis?

Are markets efficient or a random walk?

If Current Price = PV of future cash flows for each share discounted at cost of equity and if stock prices change everyday than does cost of equity change everyday or cash flows change everyday ?

Is CAPM the right model for measuring the cost of equity for efficient markets or just a tool for efficient markets.? Does Cost of Equity determing P/E of stocks ? What about Sectoral effects?

Why do stock prices change every day? Is that so because of buying and selling?

If Behavioural effects determine stock prices how does it change every day?

If marakets are efficient than markets should move only on events, but what are these events? How many events take place each day? What are these events?

How do markets discount/price these events?

If large institutional investors use market models, how do they restimate risk everyday? Do they even use these models.

What causes market in efficiency?

Transaction Costs ?
Information Assymetry?
How Soon do people with information exploit this assymetry?
Minimum Tick Size?
Currency Risks?

What about trends? Bollinger Bands, Inverted Heads and shoulders, cups and handle , break outs? How come do market technical analysts make a living?

What about irrational exhuberence?

So how efficient are markets anyway? Perfectly efficient or Varyingly efficient?

My Kinda' ATM

There are ATMs and then there are some.

Finished both exams atleast half an hour before time each, so had time to chill out. Came across this link. Wish all ATMs were like this or atleast a few. Its swell.

Term 3 Exams

Its just today and tomorrow between us and end of term 3 at ISB. However there would be four end term exams, as per ISB tradition, in these two days. I am not sure what I am doing writing this blog at this hour and if you are here at ISB, between now and and day and a half after, you should be thinking the same as to why you are reading this now ;. If you are not, I am not sure what you are doing reading this post. Please come back later for more :)

Six Degrees of Separation

I never believed it. But having used orkut, its seems more and more a possibility that people all over the world are connected to each other with atmost six peole between them.

Consider this, I was able to link back to my brother, whom I had not added as a friend, through my group mates here at ISB. Even most of my other friends from school are connected through at least one of my group mates here. Just wondering, would this have been possible before the advent of the internet. And I haven't had to go beyond 3 intermdiaries yet.

No ELP :(

Well! Actually thats not too bad considering I am taking the PaEV Course and taking both would have been difficult to manage.(Though some alums have done that in the past). But the reason why we did not get the ELP.. For starters did not have enough diversity on my team inspite of having some really good profiles, or was is poorly crafted application. Should have focussed more on them.

Term III exams are next week. Between today and 3-4 weeks later, need to figure out what stream would I be majoring in, as the bidding for electives starts 3 weeks into the fourth term. Would need to do some serious thinking on the matter. Its been too long waiting for enlightenment ;).

Consulting or not to be?

Had a session by a group of 5 consultants from BCG. 3 of them were ISB alums. The other two had been with BCG for over six years and held the stage for the most part during the presentation.They were kick starting their recruitment drive from ISB for the year. I just about managed to drag myself into the session, while thinking that a consulting career is not meant for me. But really, they exploded a lot of myths that I had about them. But more importantly, I could relate to the the life and culture they portrayed or at least gave the impression. The challenges of living up the the levels of consultants notwithstanding, while some may argue that consultants are overrated, they did manage to impress me.

They plan to conduct a few more follow up sessions, apparently to help the students prepare for the placement week. However, it may have more to do with identifying the right people early on. Anyways, nobody's complaining, considering they can hardly afford to make, what they call recruitment mistakes and students benefit too. Some of the students turned out in suits. Reminded me of the MIB recruitment line,''... Best of the best of the best", for those who have seen the movie. Although the presenters themselves were dressed more in business casuals. But, I think they flew in to hyderabad, after a full work day.

It has been a long day and I must get some long deserved sleep now. Alas! There are three more assignments due for Monday morning.

Disruptive Technologies! Myth or reality?

Here's and article by John Dvorak, that certainly makes for an interesting reading. Enough to put doubt into theories of Clayton Christensen. However, on a closer read, you realize that he is just twisting the facts. This is the classical case of just arguing and proving point . You make a convincing argument for X and then concluding by refuting Y. By the way X never really had any relation with Y. But atleast the people who are not familiar with Y, would tend to agree with you and wala, you've got yourself a fan following (Of those who hate X or know nothing about it).

Its like saying..

Cows eats grass

Cow is an animal

Therefore Animals eat grass

Lion is also an animal

Therefore Lion also eats grass.

Other variations of this twisted logic are frequently employed by war mongers or politicians. A classical example is that used by Senators to convince Brutus that Ceasar would lead to Rome's demise. They convinced him that although Ceasar was not evil now, but evil resides in him. Resident evil, would rise some day and that day, Ceasar would take Rome down. So its better to kill Ceasar now than wait for eventual doom.

Its amazing how even well meaning people like Brutus, get taken in by this twisted logic and kill a good man(read idea)

Oh, by the way the here's a link to X. Make up your own mind.